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Volume 1 Principles of Accounting, Volume 1: Financial Accounting SENIOR CONTRIBUTING AUTHORS MITCHELL FRANKLIN, LE MOYNE COLLEGE (FINANCIAL ACCOUNTING) PATTY GRAYBEAL, UNIVERSITY OF MICHIGAN-DEARBORN (MANAGERIAL ACCOUNTING) DIXON COOPER, OUACHITA BAPTIST UNIVERSITY OpenStax Rice University 6100 Main Street MS-375 Houston, Texas 77005 To learn more about OpenStax, visit https://openstax.org. Individual print copies and bulk orders can be purchased through our website.
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Ann and John Doerr Michelson 20MM Foundation Bill & Melinda Gates Foundation National Science Foundation Girard Foundation Google Inc. The Open Society Foundations Jumee Yhu and David E. Park III The William and Flora Hewlett Foundation Brian D. Patterson USA-International Foundation Rusty and John Jaggers The Bill and Stephanie Sick Fund The Calvin K. Kazanjian Economics Foundation Robin and Sandy Stuart Foundation Charles Koch Foundation The Stuart Family Foundation Leon Lowenstein Foundation, Inc. Tammy and Guillermo Treviño Study where you want, what you want, when you want. When you access College Success in our web view, you can use our new online highlighting and note-taking features to create your own study guides. Our books are free and flexible, forever. Get started at openstax.org/details/books/principles-financial-accounting Access. The future of education. openstax.org TABLE OF CONTENTS Preface 1
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Our books are free and flexible, forever. Get started at openstax.org/details/books/principles-financial-accounting Access. The future of education. openstax.org TABLE OF CONTENTS Preface 1 1 Role of Accounting in Society 11 1.1 Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting 12 1.2 Identify Users of Accounting Information and How They Apply Information 1.3 Describe Typical Accounting Activities and the Role Accountants Play in Identifying, 14 Recording, and Reporting Financial Activities 18 1.4 Explain Why Accounting Is Important to Business Stakeholders 1.5 Describe the Varied Career Paths Open to Individuals with an Accounting Education 24 32 2 Introduction to Financial Statements 61 2.1 Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate 62 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and
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Statement of Cash Flows, and How They Interrelate 62 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses 77 2.3 Prepare an Income Statement, Statement of Owner’s Equity, and Balance Sheet 81 3 Analyzing and Recording Transactions 115 3.1 Describe Principles, Assumptions, and Concepts of Accounting and Their Relationship to Financial Statements 116 3.2 Define and Describe the Expanded Accounting Equation and Its Relationship to Analyzing Transactions 124 3.3 Define and Describe the Initial Steps in the Accounting Cycle 3.4 Analyze Business Transactions Using the Accounting Equation and Show the Impact of 130 Business Transactions on Financial Statements 135 3.5 Use Journal Entries to Record Transactions and Post to T-Accounts 3.6 Prepare a Trial Balance 165 140 4 The Adjustment Process 211
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130 Business Transactions on Financial Statements 135 3.5 Use Journal Entries to Record Transactions and Post to T-Accounts 3.6 Prepare a Trial Balance 165 140 4 The Adjustment Process 211 4.1 Explain the Concepts and Guidelines Affecting Adjusting Entries 4.2 Discuss the Adjustment Process and Illustrate Common Types of Adjusting Entries 4.3 Record and Post the Common Types of Adjusting Entries 4.4 Use the Ledger Balances to Prepare an Adjusted Trial Balance 4.5 Prepare Financial Statements Using the Adjusted Trial Balance 236 239 212 227 215 5 Completing the Accounting Cycle 285 5.1 Describe and Prepare Closing Entries for a Business 5.2 Prepare a Post-Closing Trial Balance 298 286 5.3 Apply the Results from the Adjusted Trial Balance to Compute Current Ratio and Working Capital Balance, and Explain How These Measures Represent Liquidity 5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business 300 313 6 Merchandising Transactions 365
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Capital Balance, and Explain How These Measures Represent Liquidity 5.4 Appendix: Complete a Comprehensive Accounting Cycle for a Business 300 313 6 Merchandising Transactions 365 6.1 Compare and Contrast Merchandising versus Service Activities and Transactions 6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems 6.3 Analyze and Record Transactions for Merchandise Purchases Using the Perpetual Inventory 378 366 System 386 6.4 Analyze and Record Transactions for the Sale of Merchandise Using the Perpetual Inventory System 392 6.5 Discuss and Record Transactions Applying the Two Commonly Used Freight-In Methods 400 6.6 Describe and Prepare Multi-Step and Simple Income Statements for Merchandising Companies 404 6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System 408 7 Accounting Information Systems 451
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Companies 404 6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory System 408 7 Accounting Information Systems 451 7.1 Define and Describe the Components of an Accounting Information System 452 7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders 466 7.3 Analyze and Journalize Transactions Using Special Journals 7.4 Prepare a Subsidiary Ledger 7.5 Describe Career Paths Open to Individuals with a Joint Education in Accounting and 487 476 Information Systems 494 8 Fraud, Internal Controls, and Cash 531 8.1 Analyze Fraud in the Accounting Workplace 8.2 Define and Explain Internal Controls and Their Purpose within an Organization 8.3 Describe Internal Controls within an Organization 8.4 Define the Purpose and Use of a Petty Cash Fund, and Prepare Petty Cash Journal 532 542 535 Entries 547
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532 542 535 Entries 547 8.5 Discuss Management Responsibilities for Maintaining Internal Controls within an Organization 551 8.6 Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries 552 8.7 Describe Fraud in Financial Statements and Sarbanes-Oxley Act Requirements 555 9 Accounting for Receivables 577 9.1 Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions 578 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches 584
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and Purchase Transactions 578 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches 584 This OpenStax book is available for free at http://cnx.org/content/col25448/1.4 9.3 Determine the Efficiency of Receivables Management Using Financial Ratios 9.4 Discuss the Role of Accounting for Receivables in Earnings Management 9.5 Apply Revenue Recognition Principles to Long-Term Projects 9.6 Explain How Notes Receivable and Accounts Receivable Differ 9.7 Appendix: Comprehensive Example of Bad Debt Estimation 606 603 612 599 594 10 Inventory 647 10.1 Describe and Demonstrate the Basic Inventory Valuation Methods and Their Cost Flow Assumptions 648 10.2 Calculate the Cost of Goods Sold and Ending Inventory Using the Periodic Method 10.3 Calculate the Cost of Goods Sold and Ending Inventory Using the Perpetual Method 10.4 Explain and Demonstrate the Impact of Inventory Valuation Errors on the Income 657 663 Statement and Balance Sheet
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777 755 746 773 764 13 Long-Term Liabilities 809 13.1 Explain the Pricing of Long-Term Liabilities 13.2 Compute Amortization of Long-Term Liabilities Using the Effective-Interest Method 13.3 Prepare Journal Entries to Reflect the Life Cycle of Bonds 13.4 Appendix: Special Topics Related to Long-Term Liabilities 830 842 810 822 14 Corporation Accounting 859 14.1 Explain the Process of Securing Equity Financing through the Issuance of Stock 14.2 Analyze and Record Transactions for the Issuance and Repurchase of Stock 14.3 Record Transactions and the Effects on Financial Statements for Cash Dividends, Property 871 860 Dividends, Stock Dividends, and Stock Splits 879 14.4 Compare and Contrast Owners’ Equity versus Retained Earnings 890 14.5 Discuss the Applicability of Earnings per Share as a Method to Measure Performance 897 15 Partnership Accounting 925
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Performance 897 15 Partnership Accounting 925 15.1 Describe the Advantages and Disadvantages of Organizing as a Partnership 15.2 Describe How a Partnership Is Created, Including the Associated Journal Entries 15.3 Compute and Allocate Partners’ Share of Income and Loss 15.4 Prepare Journal Entries to Record the Admission and Withdrawal of a Partner 15.5 Discuss and Record Entries for the Dissolution of a Partnership 943 935 926 932 938 16 Statement of Cash Flows 955 16.1 Explain the Purpose of the Statement of Cash Flows 16.2 Differentiate between Operating, Investing, and Financing Activities 16.3 Prepare the Statement of Cash Flows Using the Indirect Method 16.4 Prepare the Completed Statement of Cash Flows Using the Indirect Method 16.5 Use Information from the Statement of Cash Flows to Prepare Ratios to Assess Liquidity 956 957 971 959 and Solvency 974 16.6 Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method 979 A
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956 957 971 959 and Solvency 974 16.6 Appendix: Prepare a Completed Statement of Cash Flows Using the Direct Method 979 A Financial Statement Analysis 1009 B Time Value of Money 1021 C Suggested Resources 1025 Index 1041 This OpenStax book is available for free at http://cnx.org/content/col25448/1.4 Preface Preface 1 Welcome to Principles of Accounting, an OpenStax resource. This textbook was written to increase student access to high-quality learning materials, maintaining highest standards of academic rigor at little to no cost. About OpenStax OpenStax is a nonprofit based at Rice University, and it’s our mission to improve student access to education. Our first openly licensed college textbook was published in 2012, and our library has since scaled to over 30 books for college and AP® courses used by hundreds of thousands of students. OpenStax Tutor, our low-cost
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that are most relevant to the needs of your course. Feel free to remix the content by assigning your students certain chapters and sections in your syllabus, in the order that you prefer. You can even provide a direct link in your syllabus to the sections in the web view of your book. Instructors also have the option of creating a customized version of their OpenStax book. The custom version can be made available to students in low-cost print or digital form through their campus bookstore. Visit the Instructor Resources section of your book page on openstax.org for more information. Art attribution in Principles of Accounting In Principles of Accounting, most art contains attribution to its title, creator or rights holder, host platform, and license within the caption. Because the art is openly licensed, anyone may reuse the art as long as they provide the same attribution to its original source.
{"title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf"}
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Vectorstore Dataset: Accounting

Overview

This dataset contains pre-computed vector embeddings for the accounting domain, ready for use in Retrieval-Augmented Generation (RAG) applications, semantic search, and knowledge base systems. The embeddings are generated from high-quality source documents using state-of-the-art sentence transformers, making it easy to build production-ready RAG applications without the computational overhead of embedding generation.

What This Knowledge Base Covers

This knowledge base covers core accounting concepts, principles, and practices. It includes topics such as financial statements, bookkeeping, GAAP/IFRS standards, auditing, tax fundamentals, and corporate finance. Use it to answer questions about accounting terminology, reporting standards, financial analysis, and practical accounting workflows.

Key Features

  • Pre-computed embeddings: Ready-to-use vector embeddings, saving computation time
  • Production-ready: Optimized for real-world RAG applications
  • Comprehensive metadata: Includes source file information, page numbers, and document hashes
  • LangChain compatible: Works seamlessly with LangChain and ChromaDB
  • Search-optimized: Designed for fast semantic similarity search

What's Included

This dataset contains 4,838 text chunks from 2 source documents, each pre-embedded using the sentence-transformers/all-MiniLM-L6-v2 model. Each chunk includes:

  • Text content: The original document text
  • Embedding vector: 384-dimensional float32 vector
  • Rich metadata: Source file, page numbers, document hash, and more

Dataset Details

Dataset Summary

  • Domain: accounting
  • Total Chunks: 4,838
  • Total Documents: 2
  • Database Size: 52.78 MB (8 files)
  • Embedding Model: sentence-transformers/all-MiniLM-L6-v2
  • Chunk Size: 1000
  • Chunk Overlap: 200

Dataset Structure

The dataset contains the following columns:

  • id: Unique identifier for each chunk
  • embedding: Vector embedding (numpy array, dtype=float32)
  • document: Original text content of the chunk
  • metadata: JSON string containing metadata (file_name, file_hash, page_number, etc.)

Embedding Model

This dataset uses embeddings from: sentence-transformers/all-MiniLM-L6-v2

Usage

Loading the Dataset

from datasets import load_dataset

# Load the dataset
dataset = load_dataset("meetara-lab/vectorstore-accounting")

# Access the data
print(dataset["train"][0])
# Output:
# {
#     'id': '...',
#     'embedding': array([...], dtype=float32),
#     'document': '...',
#     'metadata': '{"file_name": "...", "page": 1, ...}'
# }

Loading Back into ChromaDB

from langchain_chroma import Chroma
from langchain_huggingface import HuggingFaceEmbeddings
from datasets import load_dataset
import json

# Load dataset
dataset = load_dataset("meetara-lab/vectorstore-accounting")["train"]

# Initialize ChromaDB
embeddings = HuggingFaceEmbeddings(model_name="sentence-transformers/all-MiniLM-L6-v2")
vectorstore = Chroma(
    persist_directory="./chroma_accounting",
    embedding_function=embeddings
)

# Add documents to ChromaDB
documents = []
metadatas = []
ids = []
embeddings_list = []

for item in dataset:
    ids.append(item["id"])
    embeddings_list.append(item["embedding"].tolist())
    documents.append(item["document"])
    metadatas.append(json.loads(item["metadata"]))

# Note: You'll need to use ChromaDB's Python client directly for custom embeddings
import chromadb
client = chromadb.PersistentClient(path="./chroma_accounting")
collection = client.create_collection(name="accounting")

collection.add(
    ids=ids,
    embeddings=embeddings_list,
    documents=documents,
    metadatas=metadatas
)

Using with LangChain

from langchain_chroma import Chroma
from langchain_huggingface import HuggingFaceEmbeddings

# Initialize retriever
embeddings = HuggingFaceEmbeddings(model_name="sentence-transformers/all-MiniLM-L6-v2")
vectorstore = Chroma(
    persist_directory="./chroma_accounting",
    embedding_function=embeddings
)

# Load from HF Hub first (see above), then use with LangChain
retriever = vectorstore.as_retriever()
results = retriever.invoke("your query here")

Domain-Specific Usage Examples

This vectorstore is optimized for Accounting domain queries. Here are practical examples:

Example Queries

from langchain_chroma import Chroma
from langchain_huggingface import HuggingFaceEmbeddings

# Load vectorstore (see "Loading Back into ChromaDB" above)
embeddings = HuggingFaceEmbeddings(model_name="sentence-transformers/all-MiniLM-L6-v2")
vectorstore = Chroma(
    persist_directory="./chroma_accounting",
    embedding_function=embeddings
)
retriever = vectorstore.as_retriever(search_kwargs={"k": 3})

# Example queries for accounting domain:
example_queries = [
    "What are the main components of a balance sheet?",
    "How to record journal entries for accruals?",
    "Explain GAAP vs IFRS accounting standards",
    "What is the double-entry bookkeeping system?",
    "How to prepare a cash flow statement?"
]

# Run a query
query = "What are the main components of a balance sheet?"
results = retriever.invoke(query)

# Display results
for i, doc in enumerate(results, 1):
    print(f"\nResult {i}:")
    print(f"  Source: {doc.metadata.get('file_name', 'Unknown')}")
    print(f"  Page: {doc.metadata.get('page', 'N/A')}")
    print(f"  Content: {doc.page_content[:200]}...")

Common Use Cases

This dataset is useful for:

  • Accounting concept lookup and explanation
  • Financial reporting and standards reference
  • Bookkeeping and journal entry guidance
  • Audit and compliance information
  • Corporate finance and analysis

Real-World Example

# Complete example: Query and use results
from langchain_chroma import Chroma
from langchain_huggingface import HuggingFaceEmbeddings

# 1. Initialize (after loading from HF Hub)
embeddings = HuggingFaceEmbeddings(model_name="sentence-transformers/all-MiniLM-L6-v2")
vectorstore = Chroma(
    persist_directory="./chroma_accounting",
    embedding_function=embeddings
)

# 2. Create retriever with relevance filtering
retriever = vectorstore.as_retriever(
    search_type="similarity",
    search_kwargs={
        "k": 5,  # Get top 5 most relevant results
        "score_threshold": 0.7  # Minimum similarity score
    }
)

# 3. Query the vectorstore
query = "How to record journal entries for accruals?"
docs = retriever.invoke(query)

# 4. Process results
for doc in docs:
    metadata = doc.metadata
    print(f"📄 File: {metadata.get('file_name', 'Unknown')}")
    print(f"📃 Page: {metadata.get('page', 'N/A')}")
    print(f"📝 Content: {doc.page_content[:300]}...\n")

Dataset Statistics

Content Statistics

  • Total Chunks: 4,838
  • Total Documents: 2
  • Average Chunks per Document: 2419.0
  • Database Size: 52.78 MB (8 files)

Technical Specifications

  • Embedding Model: sentence-transformers/all-MiniLM-L6-v2 (384 dimensions)
  • Chunk Size: 1000 characters
  • Chunk Overlap: 200 characters
  • Format: Parquet/Arrow (optimized for fast loading)

Performance Considerations

Loading Time

  • Full dataset loads in ~5-15 seconds on average hardware
  • Memory usage: ~7.1 MB for embeddings alone
  • Recommended RAM: 2GB+ for full dataset operations

Search Performance

  • Typical query time: <100ms for similarity search
  • Optimized for retrieval of top-k results (k=5-10)
  • Works best with vector databases like ChromaDB, Pinecone, or Weaviate

Citation

If you use this dataset, please cite:

@dataset{meetara_vectorstore_accounting,
  title={meeTARA Vectorstore: Accounting},
  author={meeTARA Lab},
  year={2024},
  url={https://huggingface.co/datasets/meetara-lab/vectorstore-accounting}
}

Limitations and Considerations

  • Language: This dataset is monolingual (English only)
  • Domain specificity: Optimized for accounting domain queries
  • Embedding model: Uses sentence-transformers/all-MiniLM-L6-v2 - ensure compatibility if switching models
  • Update frequency: Dataset reflects state at time of publication; source documents may have been updated

Alternatives and Related Datasets

Looking for other domains? Check out the complete meeTARA Vectorstore collection:

Healthcare Domain

  • 🏥 meetara-lab/vectorstore-general_health - General Health (35,556 chunks)
  • 💊 meetara-lab/vectorstore-healthcare - Healthcare (Available)
  • 🧠 meetara-lab/vectorstore-mental_health - Mental Health (407 chunks)
  • 💊 meetara-lab/vectorstore-nutrition - Nutrition (1,165 chunks)
  • 💊 meetara-lab/vectorstore-senior_health - Senior Health (410 chunks)
  • 👩 meetara-lab/vectorstore-women_health - Women Health (318 chunks)

Education Domain

  • 📚 meetara-lab/vectorstore-academic_tutoring - Academic Tutoring (64,845 chunks)
  • 📚 meetara-lab/vectorstore-education - Education (Available)

Other Domains

  • 📁 meetara-lab/vectorstore-ai_ml - Ai Ml (131 chunks)
  • 📁 meetara-lab/vectorstore-bipolar_disorder - Bipolar Disorder (65 chunks)
  • 📁 meetara-lab/vectorstore-chronic_conditions - Chronic Conditions (1,882 chunks)
  • 📁 meetara-lab/vectorstore-economics - Economics (2,195 chunks)
  • 📁 meetara-lab/vectorstore-emergency_care - Emergency Care (52 chunks)
  • 📁 meetara-lab/vectorstore-medication_management - Medication Management (161 chunks)
  • 📁 meetara-lab/vectorstore-parenting - Parenting (460 chunks)
  • 📁 meetara-lab/vectorstore-preventive_care - Preventive Care (253 chunks)
  • 📁 meetara-lab/vectorstore-programming - Programming (171 chunks)
  • 📁 meetara-lab/vectorstore-publish - Publish (Available)
  • 📁 meetara-lab/vectorstore-software_development - Software Development (82 chunks)
  • 📁 meetara-lab/vectorstore-space_technology - Space Technology (15 chunks)
  • 📁 meetara-lab/vectorstore-sports_recreation - Sports Recreation (Available)
  • 📁 meetara-lab/vectorstore-stress_management - Stress Management (26 chunks)
  • 📁 meetara-lab/vectorstore-tech_support - Tech Support (2,920 chunks)

🔗 View all meeTARA datasets: https://huggingface.co/meetara-lab

💡 Tip: Combine multiple domain datasets for comprehensive multi-domain RAG applications!

Maintenance and Updates

This dataset is maintained by the meeTARA Lab team.

  • Last Updated: 2026-02-07
  • Version: 1.0
  • Update Policy: Datasets are updated periodically as source documents are added or improved
  • Notifications: Follow the repository to receive updates when new versions are published

For updates, bug reports, or feature requests, please visit our GitHub repository.

License

This dataset is released under the Apache 2.0 License. This means you are free to:

  • Use the dataset commercially and non-commercially
  • Modify and create derivative works
  • Distribute the dataset and modifications

Please see the full license text for complete terms.

Citation

If you use this dataset in your research or applications, please cite it as:

@dataset{meetara_vectorstore_accounting,
  title={meeTARA Vectorstore: Accounting},
  author={meeTARA Lab},
  year={2024},
  url={https://huggingface.co/datasets/meetara-lab/vectorstore-accounting},
  license={apache-2.0},
  task={feature-extraction, text-retrieval, rag}
}

Contact and Support

Contributing

We welcome contributions! If you'd like to:

  • 🐛 Report bugs
  • 💡 Suggest new domains
  • 📝 Improve documentation
  • 🔧 Contribute code

Please visit our GitHub repository.


Made with ❤️ by the meeTARA Lab team

Part of the meeTARA Vectorstore Collection - Empowering RAG applications with high-quality domain-specific embeddings.

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